EAP Task Force

EAP Task Force
Lessons learnt from the national and province
level finance strategy case-studies in the
municipal waste management sector
Alexandre Martoussevitch
Tenth Environmental Finance Network meeting
Paris, 22-23 February, 2007
Outline of the presentation
Objectives and scope of the publication
Outline of the publication
Status of the MW sector in EECCA
– Key challenges facing MW sector
Why finance strategies (FS)
Key lessons learnt from FS case-studies
– on sectoral policy
– on FS methodology
– on FEASIBLE tool
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Key recommendations
Objective and scope of the
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The objective is to synthesise and
disseminate the lessons learned from the
FS case-studies on MSW, implemented
so far in EECCA countries as well as in
some EU accession and candidate
The publication also reflects on the FS
methodology and FEASIBLE computer
tool which have been continuously
developed, assessing their present status
and identifying possible areas for
development and improvements
Outline of the publication
Executive summary
Framework for policies in the municipal
waste sector (based on OECD
Municipal waste management in EECCA
– Some challenges for municipal waste sector in
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Why Finance strategies
Key recommendations
Adaptation of the methodology
Framework for policies in the
municipal waste sector
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Best practices from OECD countries
provide some guidance for policy design:
– sustainable use of natural resources,
minimisation of waste and protection of human
health and the environment from adverse
effects that may result from waste
– diversion of waste streams to the extent
possible from facilities operating with lowstandards to facilities that manage waste in an
environmentally sound and economically
efficient manner
– fair competition between enterprises in the
MW sector, ensuring that high environmental
standards are met by all competing
Potential benefits from sound
municipal waste management
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Social benefits (improved quality of life,
Direct health benefits
Positive impacts for eco-systems and
Resource benefits
Wider economic benefits (structural
reforms, economic growth)
Recent trends in municipal
waste generation in EECCA
Key driver: Final Private Consumption
– Income elasticity = 1 in OECD and EU
Specificity of EECCA in 1991-1999:
– Household waste generation per unit of GDP
is much higher than in EU
– Despite huge decline in GDP and HH income
in 1990s, household waste generation did not
fall much due to:
• substantial changes in the packaging for food
and beverage
• high share of household expenditure for food
• labour migration from rural to urban areas
 Changes in the density and the
composition of municipal waste
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Status of municipal waste-related
services and infrastructure
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“Free-rider” problem (institutional)
No separate waste collection
Logistic is not optimal
Sorting is almost absent
– focused on few most profitable recyclables:
– profitable if price > USD 80/tonne, distance to
recycling facility below 100-150 km
– C&D waste: recycling could be profitable if just
10-15 000 tonnes is recycled
– Collecting recyclables is an area of “grey
Status of waste disposal sites
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Properly operated landfills are rare in
EECCA; the status of dump sites is poor
Poor monitoring of the status of waste
disposal sites, and no leachate control
Widespread co-disposal of municipal
waste together with industrial, medical
and other types of waste
Absence of methane/landfill gases
collection systems
Over-utilisation of many landfills and
dump sites
Illegal and uncontrolled waste disposal 9
Why is the status of the sector
so poor?
Low on the political agenda
Low tariff rates and little allocations from
the public budget
– MWM company revenues: Rostov-on-Don:
EUR 2, Armenia: EUR 0.7 - per citizen per
– allocation from the public budget: typically
below 1% of total public expenditure, in that
operational subsidies >80%
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Decentralisation of responsibilities not
supported by adequate revenue base
Law on local self-governance vs Budget
and Tax Codes
Demand for sound strategic
planning and Finance strategies
Some EECCA countries and provinces tried to
develop target programmes for MWM sector but
implementation have failed
– priorities were not clearly linked to policy, and
investment projects were too many (“wish lists”)
– targets were not specific, measurable, agreed,
realistic and time bound
– expenditure needs exceeded available finance
– the institutional set-up was weak
– lack of enforcement
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Demand for Strategic planning
FS case-studies were undertaken to help EECCA
countries to address these demands
FS case-studies in MW sector
– Armenia (Lori and Shirak provinces/marzs)
– Ukraine (national)
– Russian Federation (Novgorod, Yaroslavl and
Rostov oblasts, St. Petersburg city and
Leningrad oblast, KhMAO, the Caucasus
mineral water region)
In EU accession and candidate countries:
– Latvia, Lithuania, Turkey (national)
– Bulgaria, Poland (province level)
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Outcomes of the FS casestudies implemented so far in
the MWM sector
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In Armenia, the FS case-study provided an input
to "The Concept for MSW Management in
Armenia" submitted for review and eventual
approval to the GoA in January 2007
In Ukraine, the Finance Strategy was approved as
a national sectoral policy document
In Novgorod Oblast of Russia the FS facilitated a
substantial revision of regional waste
management plans and revealed many options for
inter-municipal landfills
Implementation of the Finance
Strategy in Novgorod
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Tariff rates increased as advised, but
households still do not pay for waste
Sorting station in Novgorod-the-Great
with pressing residual waste (built with
Danish support)
Inter-municipal landfill for Borovichi and
Okulovka under construction, etc.
Key Challenges for Sectoral Policy
in MWM Sector in EECCA
Service standards are not fully developed
– e.g. for proper operation of landfills and dump
sites and closure of fully loaded sites
Compliance and lax enforcement are
major issues
Capacity to plan and implement the plans
– lack of administrative capacity (often due to
excessive fragmentation of responsibilities)
– poor data-base for decision-making and/or
improper approach to planning
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 Costly mistakes in planning
Lack of weighing, poor accounting and
Key Challenges… - 2
Improper business models and poor
contractual relations
 many opportunities for rent-seeking
and opportunistic behavior
Excessive fragmentation
– Fragmentation of responsibilities
– Lack of inter-municipal co-operation
– some EECCA countries are moving to even
higher decentralisation and fragmentation!
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Similar problems were faced by other
countries but they found effective
solutions: e.g. Denmark, Turkey
Key Challenges… - 3
Lack of a sound tariff policy
– externalities are not internalized (MWM
companies do not pay pollution charges)
– non-transparent cross-subsidisation
– households do not pay for waste disposal
because affordability constraints are
– HHs spent just 0.2%-0.4% of their budget,
while the affordability limit is 0.75-1.7%
 poor financial status of MWM companies
and/or higher demand for operational
subsidies from the public budget
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How to sustain interest from the private
sector, while achieving compliance? 17
Key policy recommendations
The benefits of waste prevention policies
– Implement incentives for recycling and reuse
– Stimulate demand for recycled materials
Service defined by a comprehensive set
of standards
– BUT no progress will materialise until rigorous
enforcement mechanisms are in place
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Inter-municipal cooperation as a policy
Key policy recommendations 2
EAP Task Force
Strict, unambiguous, performance-based
contractual arrangements should be
defined between municipalities and their
service providers
When service quality improves, tariffs for
households can be raised closer to the
affordability limit
Such policy packages are a precondition
to attract private (operators and
financiers) with sustainable business
Key policy recommendations 3
Finance strategies, as they have been
developed by the OECD/EAP Task Force
Secretariat and other institutions, can
support policy dialogues around these
issues, at national and sub-national level
But an integrated approach to
implementing the suggested finance
strategy still needs to be developed,
using experience from WSS sector
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